Number of the Week: Unemployment Rate Without Government Cuts

ByPhil Izzo

7.1%: What the unemployment rate would be without government job cuts.

While most industries have added jobs over the past three years, the recovery has largely bypassed the government sector.

Federal, state and local governments have shed nearly 750,000 jobs since June 2009, according to the Labor Department‘s establishment survey of employers. No other sector comes close to those job losses over the same period. Construction is in second worst place, but its 225,000 cuts are less than a third of the government reductions. To be sure, construction and other sectors performed worse during the depths of the recession, but no area has had a worse recovery.

A separate tally of job losses looks even worse. According to the household survey, which is where the unemployment rate comes from, there are nearly 950,000 fewer people employed by the government than there were when the recovery started in mid-2009. If none of those people were counted as unemployed, the jobless rate would be 7.1%, compared with the 7.7% rate reported on Friday.

There are a number of reasons that there’s such a disparity between the two numbers of government job losses, including difference in sample size and volatility in the household sector. But the household tally almost always looks bigger than the establishment number. This is because the household survey asks people directly where they work, whereas the other survey just asks the employer. So, for example, a garbage collector who works for a company that has a government contract may just say that he works for the government.

That issue highlights how hard it will be to see the effect on the job market of the reductions in federal spending known as the sequester. It won’t be enough to look at what happens to government jobs, since many positions are indirectly financed by government spending.

Whether you view reducing the size of the public sector as a positive or negative, it clearly means fewer jobs and a higher unemployment rate in the near term.

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